Monetary Policy and The Fed Quiz

What is the main job of the Federal Reserve related to the economy?

• Collect taxes

• Control the money supply

• Print money

• Set gas prices

What happens when interest rates go down?

• People save more

• The Fed makes money

• People borrow and spend more

• Prices go down

Which policy is used to slow down the economy?

• Contractionary monetary policy

• Expansionary monetary policy

• Budget balancing

• Liquidity control

What’s the reserve requirement?

• Tax paid by banks

• The % of deposits banks must keep

• Interest rate on loans

• Government spending plan

Which of these is NOT a tool of The Fed?

• Reserve Requirement

• Discount Rate

• Income Tax

• Open Market Operations

What does it mean when the Fed buys government bonds?

• Taxes go up

• More money enters the economy

• The Fed loses money

• Interest rates rise

Why did the Fed get blamed for making the Great Depression worse?

• It let banks fail and didn’t increase liquidity

• It printed too much money

• It increased taxes

• It bailed out car companies

What is Quantitative Easing (Q.E.)?

• The Fed buying long-term assets to boost money supply

• Cutting government programs

• Printing money for citizens

• Lowering taxes across the board

What is “liquidity”?

• A special kind of bond

• How easily money can be accessed

• A tax cut

• The amount of gold in the Fed

What might cause banks to hold excess reserves?

• Inflation is too high

• Interest rates are low

• Uncertainty and stricter rules

• People deposit more money